The development, which comes at a time when he is trying to overcome financial problems in his grounded Kingfisher Airlines, Mallya said this is not a "sell out" to save the carrier and no funds from this deal will be used for reviving the airlines.
Following the completion of the stake acquisition, which took six years to materialise, India will become the second largest market for Diageo after the US.
"This is not a sell-out, it's my appreciation of needs... I have recognised the consolidation needs (of Diageo) and whole-heartedly appreciate it... I have not sold any family jewel but embellished it," Mallya told reporters in a conference call after announcing the deal.
He stressed that the money received from Diageo will not be used to bail out the beleaguered Kingfisher Airlines, which will address issues separately and independently.
"I do whatever is best for my businesses. I have done what is best for my beer and I have done what is best for my spirit business. I will do the best for the airline, but separately... I will address the Kingfisher problems fairly and squarely. These are mutually exclusive," Mallya said.
Earlier in a joint statement, the UK-based firm said it has entered into an agreement with United Breweries (Holdings) Ltd (UBHL) and United Spirits Ltd (USL) to acquire 27.4 per cent stake in USL, the top liquor company in India at Rs 1,440 per share aggregating Rs 5,725.4 crore.
Shares of the company today closed at Rs 1,359.70 on the BSE, up 1.22 per cent over the previous close.
